Bond crisis

We have observed that both the UK and the US are implementing policies likely to fuel inflation. In this environment, it is difficult to see how bonds can perform strongly as an asset class. In the short term, there is pressure on central banks to lower interest rates, and it is likely that this will occur. However, such a move risks exacerbating inflation, potentially leading to a dangerous 1970s-style inflation spiral. While short-term interest rate cuts may present a brief window of opportunity for those willing to take the risk, investing in bonds would require precise timing to avoid losses as prices fluctuate and as advisers we don't run our portfolios on this basis. For those feeling particularly bold, there might be opportunities to capitalise on recent price declines in bonds over the next six months. However, navigating this space requires careful judgement and a willingness to act decisively. From a longer-term perspective—over the next two years—I remain extremely cautious and would advocate for a significantly underweight position in bonds.